SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission file number 0-13642
HUDSON'S GRILL OF AMERICA, INC.
(Name of small business issuer in its charter)
California
(State or other jurisdiction of incorporation)
95-3477313
(IRS Employer Identification Number)
16970 Dallas Parkway, Suite 402, Dallas, Texas 75248
(Address of Principal Executive Offices)
Issuer's telephone number, including area code:
(972) 931-9237
<PAGE>
Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of
the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest
practicable date. 6,056,986
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
September 30, December 28,
1998 1997
CURRENT ASSETS:
Cash and cash equivalents $ 80,217 $ 42,401
Accounts receivable, net of allowance
for doubtful accounts of $85,000
and $49,000 respectively 42,665 69,830
Current portion of notes and leases
receivable 100,000 100,000
Prepaid expenses and other
receivables 29,833 23,185
Total current assets 252,715 235,416
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements 91,171 2,969
Restaurant equipment 33,378 33,378
Furniture and fixtures 5,851 5,851
Total property and equipment 130,400 42,198
Less accumulated depreciation
and amortization (12,079) (7,030)
Property and equipment, net 118,321 35,168
LONG TERM PORTION OF NOTES
AND LEASES RECEIVABLE, net of
allowance for doubtful accounts
of $33,000 and $33,000 respectively 770,247 791,858
LIQUOR LICENSES-net of
accumulated amortization
of $30,000 at December 28, 1997 30,815
OTHER ASSETS 54,457 23,463
Total assets $ 1,195,740 $ 1,116,720
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, December 28,
1998 1997
CURRENT LIABILITIES:
Accounts payable $ 73,656 $ 40,886
Accrued liabilities 258,731 201,343
Total current liabilities 332,387 242,229
LONG-TERM DEBT 100,000
OTHER LONG-TERM LIABILITIES 146,986 206,494
DEFERRED INCOME 726,633 778,367
COMMITMENTS AND CONTINGENCIES
(Note 4)
SHAREHOLDERS' EQUITY:
Preferred stock, 5,000,000
shares authorized, none
issued or outstanding
Common stock, no par value
100,000,000 shares authorized
6,056,986 shares issued and
outstanding 4,456,457 4,456,457
Accumulated deficit (4,566,723) (4,566,827)
Total shareholders' equity (110,266) (110,370)
Total liabilities and
and shareholders' equity $1,195,740 $1,116,720
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended
September 30, September 30,
1998 1997
REVENUES:
Net sales $ $ 103,890
Franchising fees from restaurants
under sales contracts 3,316
Franchise revenues 68,760 69,604
Equipment lease income 12,109 18,097
Gain on sales of restaurants 4,223 17,021
Other income 18,335 17,177
Total revenues 103,427 229,105
COSTS AND EXPENSES:
Cost of sales 11 116,938
General and administrative 112,954 168,158
Depreciation and amortization 1,984 8,068
Total costs and expenses 114,949 293,164
Income (loss) from operations (11,522) (64,059)
OTHER INCOME (EXPENSE):
Interest expense
Interest income 15,028 20,315
Total other income (expense) 15,028 20,315
INCOME (LOSS) BEFORE INCOME TAXES 3,506 (43,744)
Provision for income taxes
NET INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS) $ 3,506 $ (43,744)
INCOME (LOSS) PER SHARE
Basic and diluted net
income (loss) and comprehensive
income (loss) per share $ .0003 $ (.007)
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the nine months ended
September 30, September 30,
1998 1997
REVENUES:
Net sales $ 301,441 $ 103,890
Franchising fees from restaurants
under sales contracts 15,573
Franchise revenues 212,952 252,463
Equipment lease income 45,172 56,139
Gain on sales of restaurants 36,591 53,165
Other income 52,164 51,440
Total revenues 648,320 532,670
COSTS AND EXPENSES:
Cost of sales 310,442 116,938
General and administrative 368,155 445,584
Depreciation and amortization 8,324 24,371
Total costs and expenses 686,921 586,893
Income (loss) from operations (38,601) (54,223)
OTHER INCOME (EXPENSE):
Interest expense (251) (672)
Interest income 38,955 61,494
Total other income (expense) 38,704 60,822
INCOME (LOSS) BEFORE INCOME TAXES 103 6,599
Provision for income taxes
NET INCOME (LOSS) $ 103 $ 6,599
INCOME (LOSS) PER SHARE
Basic and diluted net
income (loss) and comprehensive
income (loss) per share $ .00001 $ .0007
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
For the nine months ended
September 30, September 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 103 $ 6,599
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Depreciation and amortization 8,324 24,371
(Gain) loss on sales and closures
of restaurants (36,591) (53,165)
Changes in assets and liabilities:
Accounts receivable (19,273) 3,944
Prepaid expenses and other (4,947) (8,315)
Accounts payable 32,770 (17,100)
Accrued liabilities and other (5,534) (118,848)
Net cash provided (used)
by operating activities (25,148) (162,514)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of assets 20,120 4,634
Notes receivable principal payments 31,712 170,125
Leases receivable principal payments 37,148 51,692
Fixed assets and other (126,016) (4,528)
Net cash provided (used) by
investing activities (37,036) 221,923
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 100,000
Repayments of notes payable (35,542)
Net cash provided (used) by
financing activities 100,000 (35,542)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 37,816 23,867
CASH AND CASH EQUIVALENTS, beginning
of period 42,401 78,680
CASH AND CASH EQUIVALENTS, end
of period $ 80,217 $ 102,547
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 251 $ 902
Income taxes paid $ $
HUDSON'S GRILL OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
Period ended September 30, 1998
The Company sold the restaurant located in Carrollton, TX. No note
receivable or lease receivable was generated with this sale.
Period ended September 30, 1997
In connection with the sale of a restaurant and equipment, the Company
received a note receivable of $114,200 and a lease receivable of $240,000.
HUDSON'S GRILL OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although management believes
the disclosures are adequate to make the information presented not
misleading. These interim financial statements should be read in
conjunction with the Company's annual report and most recent audited
financial statements included in the report on Form 10-KSB for the
year ended
December 28, 1997, filed with the Securities and Exchange Commission.
The interim financial information included hereto is unaudited;
however, such information reflects all the adjustments (consisting
solely of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results of operations
and cash flows for the interim periods. The results of operations
for the nine months ended September 30, 1998 are not necessarily
indicative of the results to be expected for the full year.
Item 2. Management Discussion and Analysis.
Material changes in the financial condition of the issuer and
in the results of its operations since the end of its last fiscal
year and its results from the comparable period in its last fiscal
year include the following.
The issuer's accounts receivable at September 30, 1998 ("Q3")
were $42,665 as compared to $69,830 at December 28, 1997 ("FYE").
Cash was $80,217 as compared to $42, 401 at FYE, due largely in part
to a long term borrowing of $100,000. Leasehold improvements
increased at Q3 to $91,171 from $2,919 at FYE because of the
leasehold development of the Richardson, Texas, location by a
subsidiary.
Accounts payable increased at Q3 to $73,656 from $40,886 at
FYE. Accrued liabilities also increased in Q3 to $258,731 from
$201,343 at FYE, reflecting an increase in lease obligations.
Material changes in the results of operations of Q3 compared to
the third quarter of 1997 ("Q97") include the following. Net Sales
decreased to $0 in Q3 from $103,890 in Q97, while cost of sales also
decreased to $11 in Q3 from $116,938 in Q97. These are a result of
the disposition of a restaurant that was in operation as a
subsidiary in 1997; their results were consolidated into the
financial statements of the Company in 1997. Franchising fees,
franchise revenues, equipment lease income, and other income
remained about the same from Q97 to Q3. Gneral and administrative
expenses dropped to $112,954 at Q3 from $168,158 at FYE due to the
termination of a consulting agreement as of December 31, 1997.
Income from operations improved from a loss of ($64,059) to a loss
of only ($11,522).
The issuer incurred a gain of $3,506 ($.0003 per share) in Q3
as compared to a loss of $43,744 (($.007) per share) in Q97.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The registrant incorporates by reference its response in its
Form 10-KSB filed with the Securities and Exchange Commission on May
15, 1998. Currently the only litigation against the registrant are
two lawsuits involving leases at former Hudson's Grills in Westlake,
California, and Whittier, California, and a lawsuit by a franchisee
attempting to recover expenses incurred by the franchisee when they
operated a Hudson's Grill in Pomona, California. The lawsuit
involving the lease of the former Hudson's Grill at Whittier, was
filed during the third quarter of 1998; the current landlord at that
location is asking for more than $2 million. The registrant has
filed an answer and denies that it owes that much, if anything at
all, because of potential defenses and counterclaims.
Item 2. Changes in Securities.
There were no changes in securities or in the rights of the
holders of the registrant's securities during Q3.
Item 3. Defaults Upon Senior Securities.
The registrant does not currently have any senior securities
outstanding. Consequently, there are no defaults on senior securities.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders
during Q3.
Item 5. Other Information.
The registrant does not have any material new information that
has not already been disclosed in Forms 8-K and 10-KSB filed since
July 1, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Index. Following are the exhibits required under
Item 601 of Regulation S-B for Form 10-QSB:
Item 601
Exhibit No. Description Page Number
(2) Plan of Acquisition, Reorgani-
zation, Arrangement, Liquida-
tion, or Succession n/a
(4) Instruments Defining the Rights
of Holders Including Indentures n/a
(6) No Exhibit Required. n/a
(11) Statement Re: Computation of
Per Share Earnings n/a <FN1>
(12) No Exhibit Required. n/a
(15) Letter on Unaudited Interim
Financial Information n/a <FN2>
(18) Letter on Change in Accounting
Principles n/a
(19) Previously Unfiled Documents n/a
(20) Reports Furnished to Security
Holders n/a
(23) Published Report Regarding
Matters Submitted to Vote n/a
(24) Consent of Experts and Counsel n/a
(25) Power of Attorney n/a
(27) Financial Data Schedule attached
(28) Additional Exhibits n/a
<FN1> No explanation of the computation of per share
earnings on both the primary and fully diluted basis is necessary
because the computation can be clearly determined from the
financial statements and the notes to the financial statements.
<FN2> No reports on unaudited interim financial information
have been prepared by the Company's independent accountants, and
therefore, no letter is required from the Company's independent
accountants.
(b) Reports on Form 8-K. The following reports on Form 8-K
were filed during the quarter ending September 30, 1998, or shortly
thereafter:
1. September 21, 1998. The Company announced the opening of the
Hudson's Grill in Jackson, Michigan, the anticipated opening of the
Hudson's Grill in Richardson, Texas, and the results of the annual
shareholders meeting.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(Registrant) HUDSON'S GRILL OF AMERICA, INC.
By: s/s David L. Osborn
David L. Osborn, President
Date: November 16, 1998
elink\filing\10QSB.983
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE REGISTRANT'S QUARTERLY FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-END> SEP-30-1998
<CASH> 80,217
<SECURITIES> 0
<RECEIVABLES> 42,665
<ALLOWANCES> 85,000
<INVENTORY> 0
<CURRENT-ASSETS> 252,715
<PP&E> 130,400
<DEPRECIATION> 12,079
<TOTAL-ASSETS> 1,195,740
<CURRENT-LIABILITIES> 332,387
<BONDS> 0
0
0
<COMMON> 4,456,457
<OTHER-SE> (4,586,916)
<TOTAL-LIABILITY-AND-EQUITY> 1,195,740
<SALES> 0
<TOTAL-REVENUES> 103,427
<CGS> 11
<TOTAL-COSTS> 114,944
<OTHER-EXPENSES> (15,028)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,506
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,506
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,506
<EPS-PRIMARY> .000
<EPS-DILUTED> .000
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